The gold price rose on Tuesday and is now trading at $4305 per ounce—just below the record high from October of $4381.
The rise reflects a broader flight to safe havens as investors navigate uncertain monetary policy and seek inflation protection. With the market pricing in a 76% chance of a new rate cut in January, gold's appeal as a non-yielding asset has only strengthened.
Historical divergence signals potential reversal
The American dollar, which was near a two-month low during the Asian session, provided additional tailwind for the precious metal. Gold has risen over 64% so far this year and marks its best annual return since 1979. Rate cuts from the Federal Reserve, ongoing central bank purchases, and steady inflows into gold-based ETFs have been drivers of the rise.
Holdings in gold-based exchange-traded funds (ETFs) have increased every month this year except for May, according to the World Gold Council, highlighting investors' persistent interest in this safe asset class. As interest rates fall, the opportunity cost of holding gold decreases, making it more attractive compared to interest-bearing investments.
At the same time, Bitcoin continues to hover around $86,000 after a sharp price drop that triggered $200 million in long positions in one hour on Monday. The leading cryptocurrency is about 30% below the October peak of $126,210. While gold acts as a safe haven in turbulent times, Bitcoin is often treated as a risky asset and experiences outflows when investors seek stability.
The increasing gap between gold and Bitcoin has captured analysts' interest. Crypto trader Michaël van de Poppe points out that Bitcoin's relative strength index against gold has fallen below 30 for only the fourth time in history.
Technical analysis from expert misterrcrypto supports this view. He shows that the BTC/Gold pair is now testing a long-term rising support line for the fourth time since 2019. The Z-Score is -1.76, indicating an oversold situation, and previous touches of this support level have led to significant gains.
Nevertheless, technical patterns do not guarantee future movements. Today's macroeconomic climate is unlike previous cycles, as inflation remains high and geopolitical risks provide support for gold. How much investors will rotate from gold to Bitcoin is still uncertain.
Macroeconomic factors in focus
Markets are closely watching this week's U.S. macro data to fill the gap after six weeks of public shutdown. The U.S. Bureau of Labor Statistics will release its much-anticipated total employment reports for October and November on Tuesday. Key details, however, will be missing—including the unemployment rate for October—marking the first time in history that this central data series is broken.
Economists estimate 50,000 more jobs and an unemployment rate of 4.5%, in line with a weak but stable labor market. Even moderate weakness in the numbers will strengthen the case for more interest rate cuts, according to Morgan Stanley strategist Michael Wilson.
The Fed implemented a 25 basis point rate cut last week but signaled a pause due to persistent inflationary pressures. Fed Governor Stephen Miran stated on Monday that today's inflation does not reflect underlying conditions, asserting that 'prices are now stable again.' The market is currently pricing in a 76% probability of another cut in January.
Technical analysis
Bitcoin options data shows significant open interest concentrated around the expiration date of December 26, with heavy positions at $100,000. Analysts point to a gamma range between $86,000 and $110,000, indicating increased volatility as traders reposition themselves for year-end.
Silver, which has more than doubled this year with a rise of 121%, pulled back from Friday's record high of $64.65 but remains near historical peak levels. The surge is due to tighter inventories, strong industrial demand, and its placement on the U.S. list of critical minerals.
Gold is approaching new highs and Bitcoin is consolidating at important support levels; the coming weeks may determine whether the historical gap between these two asset classes is narrowed through rotation—or if the difference increases further.
